Exploration

Strategy
Contents
1. Foreword 3

2. Executive summary 4

3. Introduction 5

4. Current status 6

4.1 Introduction 6

4.2 The current situation 6

5. Strategic themes, objectives and targets 7

5.1 Introduction 7

5.2 Regional exploration (Promotion) 8

5.3 Licence and work programme stewardship (Regulation) 8

5.4 Subsurface technical assurance and portfolio management (Influencing) 9

6. Implementing the Strategy 12

6.1 Delivery 12

6.2 Further OGA support 13

6.3 Stakeholder engagement 14

7. Acknowledgements 15
 1. Foreword | Exploration Strategy 3

1. Foreword
The Oil and Gas Authority (OGA) was established
to regulate, influence and promote the UK oil and
gas industry, in conjunction with other regulatory
authorities, and has a range of powers to deliver
this remit.

The development of a series of strategies and

associated delivery programmes represents a key
step in setting out how the OGA, government and
industry should work together to maximise economic
recovery (MER) from the United Kingdom Continental
Shelf (UKCS) – a core recommendation of the Wood
Maximising Recovery review.

The MER UK Strategy underpins the OGA remit and

became a legal obligation on licensees in March
2016. It describes how MER should operate in
practice, setting out a legally binding obligation on
licensees and others to take the steps necessary
to secure the maximum value of economically
recoverable hydrocarbons.

The MER UK Strategy also sets out a range of

supporting obligations and safeguards, as well as
the actions and behaviours required to achieve
collaboration and cost reduction.

The purpose of these strategies and delivery

programmes, developed in collaboration with
industry and the MER UK Boards, is to promote a
new way of working across the oil and gas lifecycle.
The strategies set the key direction and the delivery
programmes provide further direction and detail on
the implementation of each strategy.
4 2. Executive summary | Exploration Strategy
2. Executive summary
The OGA is committed to maximising the economic
recovery of hydrocarbons from the UKCS through
safe and cost effective exploration and appraisal
(E&A) activities. These activities must encompass
the full range of undiscovered and undeveloped
opportunities within the UK, including frontier and
mature area potential, in order to deliver value that
supports and extends the life of producing hubs as
well as new field developments.
This Exploration Strategy supports the MER UK
Strategy and has three priority areas:
• Regional exploration – Promoting exploration
opportunities in the UK through both regional and
targeted approaches
• Licence and work programme stewardship –
Regulating the optimal use of the UK’s acreage
through licensing activities and stewardship
• Subsurface technical assurance and portfolio
management – Influencing the technical work
carried out by licensees in order to improve
exploration performance and ensure prospective
resources are efficiently and fully exploited
The Exploration Strategy is supported by a number of
other strategies, including:
• Asset Stewardship Strategy – Applies across
the exploration and production (E&P) lifecycle
and consists of four main elements: a set of
stewardship expectations, industry data surveys,
benchmarking, and stewardship reviews
• Information Management Strategy – Efficient
exploration and robust subsurface technical
evaluations must be supported by data which are
comprehensive, high-quality and up-to-date
• Technology Strategy – The OGA is working with
industry, the research community, the Oil and Gas
Technology Centre (OGTC) and government to
develop, deploy and promote new technologies
and techniques to fully unlock UKCS potential and
enable expansion into the global export market
The Exploration Delivery Programme for revitalising
exploration activity on the UKCS, centred on the
three priority areas, will be published separately.
 3. Introduction | Exploration Strategy 5

3. Introduction

In order to maximise the economic recovery of oil Such regional evaluations require efficient access to
and gas resources from the UKCS, exploration and a comprehensive and high-quality well and seismic
appraisal activity must be revitalised in both mature database on a basin-wide scale, incorporating
and frontier plays. This is a considerable task against lessons learned from both success and failures.
a backdrop of the recent fall in the oil price and Ideally a portfolio approach should be taken when
relatively high costs. selecting which wells to drill within the national
prospect inventory and the commercial partnerships
However, the need for this revitalisation is carrying out such activity should be prepared to
urgent, given the decline in production from share more knowledge and the risk and rewards of
existing infrastructure and the consequent risk of such exploration opportunities.
premature cessation of production and potential
decommissioning of critical hub facilities. Enabling and supporting these activities requires a
fit-for-purpose licensing framework that provides
This is exacerbated by pressure on the supply chain, the conditions to execute work programmes and
which has resulted in the stacking and scrapping of commercial activities. The OGA is undertaking a first-
rigs and seismic acquisition vessels and job losses principles-based review of the licensing regime for
within a highly specialised and skilled workforce. the UKCS to ensure it is fit-for-purpose.
E&A activity in the UK fell to its lowest level for The OGA has been stimulating and supporting
many years in 2015 with just 13 exploration and 13 ongoing industry activity.
appraisal wells drilled. E&A must be appropriately
stimulated and supported in order to encourage An example of this includes the introduction of the
increased drilling of Prospective and Contingent Innovate Licence, which offers a flexible approach to
Resource portfolios (refer to Figure 1). licensing and allows licensees to work with the OGA
to design an optimal work programme. This enables
Efficient and successful exploration requires more appropriate phasing of activity, rental fees and
evaluations of subsurface risk and uncertainty at the competency tests and implements a stage-gate
‘regional’ and ‘play’ level so that dependencies at the process for effective monitoring of progress.
local lead and prospect level can be quantified and
understood in order to secure an optimal drilling and
investment strategy.

Figure 1: UKCS Exploration

140

and Appraisal Well Count*

120 Exploration Wells
* 2017 and 2018 Well Forecast Appraisal Wells
from Operator Engagement 100
Number of Wells

80

60

40

20

0
1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

*2017

*2018

Year
6 4. Current status | Exploration Strategy
4. Current status
4.1 Introduction
E&A drilling activity in the UKCS has declined
considerably from its peak in 1990. Although overall
success rates have been steadily improving since
then, the average discovery size within the mature
basins of the UKCS has been decreasing. This is
a function not only of basin maturity, but also the
tendency for operators to focus on lower risk field
development infill and near-field opportunities that
generate short-term cash flow.
Despite this, the UKCS remains an attractive
exploration destination, with lower finding costs
and larger discovered volumes compared to some
neighbouring basins during 20151. The UK has a well-
established exploration skills base, including world-
leading expertise in geoscience and engineering,
which provides a solid platform for recovery.
Rejuvenation will require a significant increase in the
levels of exploration activity while maintaining success
rates and average discovery or cluster size through
selective drilling. This requires improved subsurface
understanding and the application of modern,
subsurface data acquisition, processing and analytical
techniques. Of equal importance is the improvement
of ‘full-cycle’ prospect economics through cost
reduction, collaboration, and the timely sharing of
knowledge, equipment and technology.
4.2 The current situation
The discretionary nature of exploration expenditure has
resulted in reductions in activity and capability within
companies of all sizes. Some companies are now
actively taking advantage of heavily discounted rigs
and vessels and selectively acquiring interests in new
assets and prospects; however others are struggling
to meet their obligations and finance their debt.
While the OGA is maintaining flexibility with regard
to licences and work programmes, some partner
misalignments and a stagnant divestment/acquisition
market have resulted in a number of E&A projects
stalling. The UKCS has a large inventory of prospects
and unappraised/undeveloped discoveries, with up to
9.2 billion barrels of oil equivalent (boe) undiscovered
resource potential2.
Historic barriers, such as restricted infrastructure
access, partner misalignment and limited rig
availability, have meant many of the prospects within
this inventory remain undrilled despite having been
available to industry through several licensing cycles.
The acreage landscape has become increasingly
fragmented and the natural end to the fallow initiative,
coupled with recent relinquishments, has created
the opportunity for more appropriate licence cycle
times, coherent block offerings, and collaborative
partnerships.
Within the last three to four years, the E&A market has
transformed from one where rig availability and cost
increases have been an acute constraint on activity,
to one where there is a glut of drilling units, resulting
in rentals falling to half or one-third of peak day rates
and the permanent removal of some unutilised drilling
capability.
Of equal importance to the health of the industry is
the state of the multi-client and proprietary seismic
acquisition market, which has transitioned from
extensive, wide-area high-quality surveys to a handful
of limited-area, predominantly field development
targeted surveys. Once such geophysical and well
data have been acquired, they should be made
available in a timely and accessible way in order
to facilitate effective exploration, yet this has been
hindered by fragmented data systems with no unified
approach to reporting and publishing.
The companies which have been the most
successful explorers in recent years have invested
most aggressively in modern seismic surveys.
Such geophysical activity needs to be stimulated
as a first step towards prospect generation,
reducing subsurface uncertainty and polarising risk,
which should ultimately lead to more high-quality,
drillable, exploration opportunities. The OGA is
providing parallel support by promoting the industry
internationally to create new inward investment and
renewed innovation and skills.
1
Richmond Energy Partners (2016) Surviving the Perfect Storm: The State
of Exploration 2016. Presentation by Keith Myers at APPEX Conference,
London, 1 March 2016. Available online at http://www.richmondep.com/
document/the-state-of-exploration-appex-2016/
2
https://www.gov.uk/guidance/oil-and-gas-uk-field-data#uk-oil-and-gas-
reserves-and-resources
 5. Strategic themes, objectives and targets | Exploration Strategy 7

5. Strategic themes,
objectives and targets
5.1 Introduction

The OGA Corporate Plan 2016–2021 defines the following OGA priority for revitalising exploration.

OGA Implementing a licensing regime that encourages high levels of exploration, using analysis
Priority and insights to proactively influence and help incentivise exploration on the UKCS.

Exploration is not only a means of establishing
new field developments, but is also important for
supporting continued production from existing critical
hubs. It is difficult to be prescriptive about the activity
levels required for success across the UKCS’s diverse
portfolio.
The estimated number of E&A wells required to
replace the projected decline in reserves through
production, using current discovery rates and
volumes, is in the region of 50 wells per year.
To reach this target over the next five to 10 years will
require opportunities to be matured progressively to
be ready to drill, supported by technical personnel. It
also requires improvements in information and data
access and analysis along with sustained capacity in
the supply chain.
A crucial attribute of a successful E&A portfolio is a
balance of risk versus value-based reward that delivers
an optimum return on investment through investing in
the efficient frontier3.
Exploration activity must be undertaken across a
range of opportunities, from higher-risk/high-reward
prospects to lower-risk/lower-reward near-field
prospects.
A skilful balance of interventions that tackles the
underlying technical, economic, commercial and
operational issues needs to be implemented,
recognising that a broad spectrum of measures is
likely to be more successful than any single remedy.
The OGA Corporate Plan 2016–2021 identified 10
actions required to revitalise exploration activity in the
UKCS for the direct benefit of MER UK. These actions
support three strategic priorities and are summarised
in Figure 2.
The MER UK Strategy sets out obligations in relation
to exploration.

3
Rose, P.R. (2001) Risk Analysis and Management of Petroleum Exploration
Ventures, AAPG. ISBN-13: 978-0891816638
8 5. Strategic themes, objectives and targets | Exploration Strategy

5.2 Regional exploration (promotion)
This will involve promoting exploration opportunities
in the UK through both regional and targeted
approaches, including sharing knowledge, high-quality
data and best practice. In addition to supporting
continued drilling activity in mature areas, the
exploitation of new and emerging plays needs to be
encouraged and appropriately incentivised.
5.3 Licence and work programme stewardship
(regulation)
The OGA is regulating the optimal use of the UK’s
acreage through licensing activities and work
programme stewardship and is ensuring that work
obligations or equivalent are delivered by licensees.

Near-term actions Near-term actions

The MER UK Exploration Board, supported by the The OGA is fully implementing flexible licensing through
OGA, sets strategic direction, priorities and work the Innovate Licence and will award acreage in the 29th
streams Offshore Frontier Licensing Round

The OGA is working with industry and government to The OGA is ensuring licence management is efficient
explore ways to promote and incentivise exploration in and fit-for-purpose for all licence holders. The OGA is
frontier and mature areas of the UKCS and promote the identifying barriers to planned activity and facilitating
UKCS internationally their resolution

The OGA is delivering the 2016–2017 UK Government-

funded seismic acquisition and reprocessing
Medium-term actions
programme and publishing the subsurface data
packages. The OGA and the industry are evaluating the
potential for further seismic acquisition programmes The OGA is proposing new model clauses for
under a variety of business models, including production licences
technology demonstrator projects. Work is being
carried out to provide the basis for future investment
in multi-client and proprietary seismic data, including The OGA will launch, manage and deliver the 30th
the use of cutting edge acquisition and processing Offshore Mature Licensing Round and subsequent
techniques licensing activity

The OGA is working with industry and academia to

promote regional studies and improve geological
understanding of UKCS frontier and mature areas

Medium-term actions

The OGA will provide high-quality geological maps such

as play fairway maps integrating with neighbouring
countries including Norway, Netherlands, Denmark,
Ireland, Faroe Islands and other neighbouring
jurisdictions

Delivery of significantly improved regional prospectivity

and Yet-to-Find analyses in order to promote
opportunities and communicate the size of the prize
 5. Strategic themes, objectives and targets | Exploration Strategy 9

5.4 Subsurface technical assurance and

portfolio management (influencing)

The OGA is influencing the technical work carried

out by licensees so that exploration performance is
improved and prospective resources are efficiently and
fully exploited through selective activity and shared
drilling campaigns. Where necessary, the OGA works
towards ensuring technical and commercial alignment
of partnerships within and across joint venture groups.

Near-term actions

The OGA is continuing to share lessons learnt with

industry and is introducing a process of rigorous pre-
and post-drill evaluation with operators to evaluate
exploration performance and areas for technical
improvement

The OGA is undertaking pre-drill technical evaluations

and work with companies on their prospect inventories
to help stimulate drilling campaigns and is supporting
prospect generation and the technical maturation of
opportunities, including in open acreage

Medium-term actions

The OGA is developing standards and good practice

for play and prospect assessments

The OGA is implementing systematic technical reviews

with operators to provide an independent technical
opinion, ensure that good practices are followed,
and identify areas where the OGA can guide projects
towards successful activity and investment
10 5. Strategic themes, objectives and targets | Exploration Strategy

Figure 2: Exploration Strategy overview

Why

To create an environment that stimulates

Ambition
of a balanced portfolio of frontier an

Purpose To
What

Regional Exploration
Strategic Priorities
Promote and incentivise exploration activity
across the UKCS

• Play-based exploration •D
Strategic Themes • Sharing of high-quality data and knowledge •E
• Global promotional activities •M

Promoting exploration opportunities in the UK through both Re

regional and targeted approaches, including sharing knowledge, an
This Means high-quality data and best practice. Supporting continued
drilling activity in mature areas and encouraging/incentivising
de

exploitation of new and emerging plays.

How

Exploration MER UK Promote and Geophy

Strategy Board Incentivise Data

Work with Sustain the Work with Publish UK

the MER UK MER UK industry and Governme
Exploration Exploration government funded se
Board and Board with clear to promote data pack
industry to priorities and and incentivise and evalua
develop an work streams exploration in potential fo
Actions Exploration frontier and further dat
Strategy mature areas of acquisition
and publish the UKCS and programm
corresponding support UK- and applic
Delivery based research of new
Programme and geoscience geophysic
services technolog

Key Supporting Strategies Information Management

 5. Strategic themes, objectives and targets | Exploration Strategy 11

s exploration activity within the UK, allowing industry to create value through drilling
nd mature area prospects, leading to the discovery of new oil and gas reserves

o maximise economic recovery from the UKCS

Subsurface Technical Assurance

Licence and Work Programme Stewardship
and Portfolio Management

Regulate E&A activity Influence high-quality subsurface work

Deliver licensing activity • Manage the national portfolio of prospective resources

Ensure best use of acreage • Improve technical standards
Monitor work programme delivery and compliance • Remove barriers to activity

egulating the optimal use of the UK’s acreage through licensing
nd licence stewardship. Ensuring work programmes are
elivered by licensees and enforcing licence obligations.
Influencing the technical work carried out by licensees to improve
exploration performance and to exploit prospective resources
efficiently and fully through selective activity and shared drilling
campaigns. Ensuring technical and commercial alignment of
partnerships within, and across, joint venture groups.

ysical Regional Geological Offshore Dry-Hole Prospect

Yet-to-Find
a Studies Maps Licensing Analysis Inventory

K Promote Provide Implement a Continue to Undertake pre- Deliver

ent- regional studies, high-quality flexible licensing share lessons drill technical significantly
eismic working with geological maps strategy learned and evaluation improved
kages industry and such as play for frontier performance and work with regional
ate academia, fairway maps, and mature benchmarking companies on prospectivity
or to improve integrating with acreage and with industry their prospect and Yet-to-Find
ta geological neighbouring ensure licence through process inventories to analyses
n understanding countries management of rigorous pre- help stimulate
mes of UKCS frontier including is efficient and and post-drill drilling
cation and mature Norway, fit-for-purpose evaluation with campaigns,
areas Netherlands, for all licence operators support
cal Ireland, etc holders prospect
gies generation and
opportunity
maturation

Asset Stewardship Technology

12 6. Implementing the Strategy | Exploration Strategy
6. Implementing the Strategy
6.1 Delivery
The MER UK Exploration Board has been established
and reports to the MER UK Forum. This Board, and
the leveraging of its membership and expertise,
is crucial in delivering the Exploration Strategy.
Membership of the Board includes representation
from across industry and it has identified six focus
themes which complement the overall Exploration
Strategy priorities. These are:
• Promoting Exploration – Promoting UKCS
exploration opportunities internationally, to existing
players in the UK energy market, exploration
decision makers, investors, technical experts,
service providers and academia
• 21st Century Roadmap Initiative – Creating a
five-year plan of regional subsurface studies to
support ongoing exploration initiatives and future
licensing activities
• Licensing Strategy – sets out 10 Stewardship
Expectations for industry, across the oil and gas
lifecycle, including in relation to exploration, which,
if followed, are intended to help facilitate delivery of
the MER UK Strategy obligations
• Technical Assurance – Including access
to appropriate technical data and expertise,
benchmarking exploration performance, use
of appropriate logging and sampling strategies
during well execution, and the quantification of
the Yet-to-Find potential of the UKCS
• Exploration Forum – Providing a mechanism
for open communication between the OGA and
industry on exploration matters
• Working with HM Treasury and HMRC –
Continuing to support HM Treasury and HMRC
by providing updates on the current state of
the market, discussing concepts, ideas and
opportunities for potential intervention, including
non-fiscal measures
 6. Implementing the Strategy | Exploration Strategy 13

6.2 Further OGA support Technology

In addition to working closely with the MER UK
Exploration Board and associated work groups, the
OGA is undertaking further complementary work as
well as working with other industry stakeholders.
This includes subsurface technical evaluations
targeted at generating and maturing prospects in
open acreage, in addition to OGA investment in
regional and play maps.
Additional work which supports and complements
the Strategy, includes:
Asset Stewardship Strategy
• Places a number of expectations on industry in
areas such as exploration
• Sets out expectations on gathering appropriate
data for performance analysis, tracking and
benchmarking
• The OGA will influence positive outcomes through
face-to-face stewardship reviews with operators,
including licensing and subsurface technical
discussions
• Promoting the adoption and application of new
geophysical technologies and techniques
• Championing UK expertise in structural geology,
stratigraphy, reservoir modelling, and many other
specialist domains
• Small pools and well cost reduction work, co-
ordinated by the MER UK Technology Leadership
Board, exploring the use of technology to reduce
cost and unlock some of the 300+ undeveloped
discoveries within the UKCS
• Supporting academic research communities
working towards improving exploration success
at the play and prospect scale and maximising
recovery at the reservoir and pore scale
MER UK Supply Chain, Exports and Skills Board
• Assisting capability in skills, new business models,
and growing supply chain exports potential

Information Management Strategy

• Establishment of a unified data store, providing

simplified access to information and data

• Enhanced data analysis and insights through

aggregated data and benchmarking information

• The potential for delivery of data through

cloud computing systems and the provision of
software as a service to help cost control, reduce
duplication, and enhance data integrity and
accessibility
14 6. Implementing the Strategy | Exploration Strategy

6.3 Stakeholder engagement

Key stakeholders and their relative degree of involvement with the OGA are indicated in Figure 3.

Figure 3: Stakeholder engagement

Industry & NGOs

ME
s R
cie UK
Other NGOs

en Bo
Ag
Geological Society
ar
ov IADC PESGB d
G

Supply chain,

s
BRINDEX exports and skills
Coal
Authority Geoscience
Service Sector UKOGL
CCS Association Cost and Decommissioning

Te
Efficiency

ch
ts

IAGC OGIA RD&I

en

no
rtm

Investors &

log
The Crown Asset
Estate Lenders Stewardship

y&
epa

Scottish
Enterprise Oil & NERC
Non-UK Regulators CDA
Gas UK
Technology ITF

Resea
Gov D

HMRC HSE E&P & Data

MOD BGS Cos
OGTC Other Research
DEFRA Scottish Institutes
DBEIS Universities
rch
Government OGA
DIT HMT Oil & Gas CDT

Low High Low

Degree of Involvement

BGS British Geological Survey

BRINDEX Association of British Independent Oil Exploration Companies
CCSA Carbon Capture and Storage Association
IADC International Association of Drilling Contractors
IAGC International Association of Geophysical Contractors
PESGB Petroleum Exploration Society of Great Britain
UKOGL UK Onshore Geophysical Library
OGIA Oil and Gas Independents Association
CDA Common Data Access
CDT Centre for Doctoral Training
 7. Acknowledgements | Exploration Strategy 15

7. Acknowledgements

This Exploration Strategy has been compiled with the help, input and advice of many people and organisations.
The OGA would like to acknowledge the following specific contributors:

The MER UK Exploration Board, comprising Additional advice and input has been
representation from the following organisations: provided by:

• Apache Corporation • BEIS

• BP • HMRC

• Chrysaor • HM Treasury

• DONG • Health and Safety Executive

• ENGIE

• ENI The MER UK Exploration Board work streams

have also had support from individuals in the
• Oil & Gas UK following organisations:
• Shell Ashton Lister, Azinor Catalyst, Bayern Gas, BGS,
Burgate Exploration, Cairn, Centrica, Chevron,
• Statoil
Encounter Oil, ExxonMobil, Hurricane Energy,
Ithaca Energy, Maersk Oil, Nexen/CNOOC, OGIA,
Parkmead Group, Siccar Point Energy, Total
Copyright © Oil and Gas Authority 2016

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